The Pomp Podcast - #1288 Joe McCann | Legendary Trader on Bitcoin, BONK, Meme Coins, & Internet Culture

Episode Date: December 28, 2023

Joe McCann is the Founder, CEO, & CIO of Asymmetric Financial. In this conversation, we discuss meme coins & internet culture, bitcoin vs BONK, macro environment, portfolio construction, and meaning behind “full blown depression, or dog coins to a trillion.”  ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.auradine.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Cal.com is leading the charge of scheduling platforms in the open-source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus. That's right, Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Discover how countless users are optimizing their time in unprecedented ways. Use code “POMP” for $500 off when you set your team up with Cal.com. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Joe McCann. He's the founder, CEO, and CIO of Asymmetric Financial. In this conversation, we discuss meme coins and internet culture and why there

are so many new investment opportunities that maybe the old stalwarts of Wall Street just haven't wrapped their head around yet. We then let you go into some of the meme coins that Joe has in his portfolio, and we talk about the similarities and differences to assets like Bitcoin, which are a little bit more mature. On top of that, Joe and his co-founder, they have a ton of macro experience managing billions of dollars for some of the smartest investors in the world. And yet they still boil it all down to full blown depression or dog coins to a trillion. You'll learn that and more in this episode with Joe McCann. I hope you enjoy it. Anthony Pompliano runs Pomp Investments. All views of him and the

guests on his podcast are solely their opinions and do not reflect the opinions of Pomp investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. This episode is brought to you by Auradon. They're a brand new startup led by a number of Silicon Valley legends who just raised $81 million to build the future of internet infrastructure. You're probably wondering what that means. Let me explain. There are numerous new disruptive technologies that are being adopted simultaneously, from blockchain to

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Bang, bang. I've got Joe here. Joe, you've got this fascinating thesis that a lot of the chaos and craziness that's going on on the internet, the things that the boomers and the Wall Street kind of legends, they all hate, is actually a real thing. It's not just a joke. And whether this is the meme coins or internet culture, describe a little bit about what's happening on the internet and how that's intersecting with finance and why you're

spending so much time looking for investments that really may be masked as just internet culture. Yeah. I mean, it's a great question and it's something I've thought about for quite some time because the phenomenon of a meme coin, it doesn't make any sense to a fundamental investor or if you go get an MBA at a Chicago business school, they are definitely not teaching you about this, right? But there's something intrinsic about the culture that exists online, that exists on the internet. And the joke that I use is similar to what the Supreme Court justice said about pornography is that, I don't know how to describe it, but I know it when I see it. And that's the same concept with internet culture is that you can just kind of get a sense from

memes or something going viral or how things kind of propagate throughout the broader internet is a very powerful force. And I think prior to crypto, there really wasn't a way to kind of invest in internet culture. And now there is. The way that I describe meme coins in general is they're kind of like a derivatives contract associated with internet culture. And there is no real fundamental analysis that goes into something like this. You're just participating in culture in a way that other people are as well. And this, of course, started off with Dogecoin, which was a fork of Bitcoin, a proof of work network. And it was a literal joke. And it went up to, I think, $85 billion market cap at the 2021 peak. It is unbelievable. For something that's

supposed to be a joke, I think investors should take something like this seriously. And Shiba Inu, same thing, went up to about a $45 billion, $42 billion market cap in the last run. It was supposed to be Ethereum's Dogecoin killer. And most recently, with the rise of what's happening with all of the activity on Solana, there's one on Solana called Bonk. And Bonk, what's interesting about the Bonk story, whereas Dogecoin was a joke, Shiba Inu was supposed to be this Dogecoin killer, Bonk actually saved Solana DeFi, right? So a lot of people don't understand the story behind this. On Christmas Day 2022, they airdropped this token to loads of wallets. And a lot of these wallets were developers on Solana. And some of those folks live in, I would say,

economically challenged areas where a $10,000 airdrop is worth quite a bit of money. And it enabled a lot of these developers and builders and creators to keep building and creating on the Solana network while, you know, the kind of fallout from FTX and everything else that had happened in 2022. And Solana was trading like $8 or $9, right? Since then, Bonk has actually shipped products. What's interesting about Bonk to me is that you actually have this super high powered startup wrapped in a meme or culture coin. And they have multiple products that they've shipped. The team recently did this 12 days of Bonkmas where they got more people utilizing other aspects of the Solana ecosystem. And these are guys that they just got together and said,

let's try to revamp and restart the interest and passion behind Solana. And it's working. I mean, Bonk is literally the most integrated project throughout all of Solana. And I have a of startup investments in solana and bonk is by far the most integrated and most recently i'll just kind of leave you with this why i think you know there's there's something different about the evolution of meme coins or culture coins is on christmas day uh you know bonk has this telegram trading bot called bonkbot it did more transactions per second than the entire ethereum l1 they're now generating real revenue protocol revenue more so than magic eden which is a a billion dollar startup NFT marketplace, right? So this is not your average meme coin, right?

This is something that has real kind of value and passion behind it that I think a lot of people are just starting to wake up to. What are people doing on it? Are they just trading it back and forth? And it's kind of like, you know, a joke. Oh, let me send it to my friend that's a joke and send it back. Or are people actually using it for some sort of utility outside of just, you know, the joke or the meme coin itself? Yeah, I mean, it's a good question. Like there's lots of stuff you can do with it because all of the kind of, you know, the projects and protocols and applications that exist within the Solana ecosystem. And by the way, Bonk is on, you know, multiple chains at this point, but they started on Solana. You know, it's like, hey, go try out, you know,

this purpose exchange. You can do some stuff with Bonk there or go park, you know, some Bonk in a liquidity pool here. Or there's this new project, GooseFX, that has a single-sided liquidity pool. Just park Bonk in there and earn interest on it. There's Bonk integrations into video games that are built on Solana. So it's almost like the social lubricant for people to get exposed and experienced with Solana. And in addition to that, they have really good products. So yes, I mean, are people trading it back and forth and swapping and this and that? Of course. But they're doing that with all kinds of tokens, right? And I just think that something like Bonk has this unique quality to it that enables it to be utilized well beyond just kind of like,

oh, I'm buying into like the greater full theory of the next Dogecoin because I'm actually learning about the products that exist on Solana. So what's interesting to me is if I go and I talk to someone on Wall Street, they'll tell me I'm an investor. I'm not a speculator, right? I'm not a gambler. If I go and I talk to someone in the casino, right, in Vegas, they'll tell me 100% I'm gambling. They're actually doing the same thing. There is an element of they're taking risks. The probabilities are very different.

I would not encourage most people to go to the casino and think that they're going to win nearly at the rate that they could win in the stock market. But to a degree, the stock market is a casino as well, and there's gambling going on. It's just kind of I always joke that, like, if you wear a suit tie and have cologne on, you call it something different than if you're actually just drunk late at night. Now, I will bring that exact same framework to these meme coins. And what I would say is like, to a degree, Bitcoin is a meme coin in the sense of there are memes that surround Bitcoin and there is an internet culture that surrounds it. It's kind of reinforcing, very similar to what you're talking about here. But it almost feels like it's the one that's got the suit, the tie, and the cologne on.

It's kind of like broken out. And people would say, hey, don't call it a meme coin. Like it's something else. Is there more similarity maybe than people realize between, you know, Bonk, which seems on one end of the spectrum and Bitcoin, which seems like it's on the other end of the spectrum? Yeah. I mean, the analogy you're using of like, you know, the guy's cloning a suit and tie or something is doing the same thing as the guy smoking a Paul Mall at the casino. It's so spot on. Because at the end of the day, you can dress up investing any way you want. But at the end of

the day, you're speculating. You are speculating on the future outcome of the cash flows of a company or the value of a commodity or whatever that thing may actually be, you're forecasting some event in the future so that you can make money. That's basically gambling, right? Now, we don't want to call it that because, hey, these guys get paid a lot of money to manage people's money, right? And they got to maintain that persona. I think the other thing is that a lot of investors in general, but certainly in crypto, they attempt to over-intellectualize their investments. And then they end up missing something like Bonk, which my fund, full disclosure, we've been an owner of Bonk for quite some time now. And it's gone up like 45x in the past two months.

And so how do you explain that to your LPs? How do you explain that to your investors to say something to the extent of like, well, it's just this kid thing and it doesn't really have any fundamental value, it's like, right, but it went up like 50x. And, you know, if you have a concentration risk policy, like any, you know, risk manager would, you can't blow up, you know, buying 2% of your AUM in a meme coin, right? And so there's this push and pull between folks that want to over intellectualize their investments to justify it, right? We're seeing a lot of this right now in the Ethereum ecosystem. And we've seen it in Bitcoin as well in the past. But when you see a trade opportunity or you see a network that's about to just explode or something that's

going to go viral and you can invest in that, I mean, to me, you have to take a shot at something like that. And so on the spectrum of Bitcoin as a meme versus something like Bonk on the other end of the spectrum, there's no doubt that Bitcoin has, certainly in the early days, benefited from internet culture and the memes and the kind of virality around this new asset. It has now certainly grown up, right? Thank you, BlackRock and Bitwise and everybody else that's doing their part. But at the end of the day, it still is absolutely, I mean, it's a digital asset, right? It is crypto, it is internet native, digitally native. And I think it's fair to say that it is probably on the more adult-like version of the meme coin, but it is absolutely

has characteristics that are consistent with most meme or culture coins. Now, when I see these coins that are so asymmetric, I know the fund itself is called asymmetric, right? But it almost feels like the opportunity cost, or definitely it's true that the opportunity cost of not buying is higher than buying and missing. How does that change portfolio construction, right? Because now all of a sudden you're not doing cashflow analysis and trying to figure out and build a portfolio in the same way that you would where maybe there's a 20% downside and a 2X upside,

check out 45X upside, 1X downside. And so how does that change the way you will actually think about allocating capital out of a fund? Yeah, I mean, look, this is something that myself and my team kind of debate internally a lot. It's portfolio construction and it has a lot to do with

how we view the broader market, right? So we launched the fund in June of 2022. very interesting time to be launching a crypto fund. And we were bearish, right? We had a very bearish outlook, interest rates, and then the kind of, you know, every month there seemed to be a generational crisis happening in crypto. It's not really when you want to be long, right? We obviously flipped that at the beginning of this year and have benefited from that and have gotten, you know, full blown, you know, bull market sentiment since, you know, call it mid October, late October. How does that relate to the composition of our portfolio? So first,

asymmetric, we have an early stage VC fund. So with those, it's your standard early stage venture capital, startups, tokens, equity, etc. Let's just talk about the hedge fund because I think that's the important part that we're discussing here. So hedge fund, look, we're a long, short, multi-strat directional, excuse me, discretionary hedge fund. Our job is to make money for our LPs. And if we see trade opportunities, we put them on. We are not married to trades. Myself and my trading partner have over 45 years of combined trading experience with billions under management. This is not new to us. The key with crypto is that when a lot of folks, especially from TradFi, get into it, they can't stomach the vol, the volatility. And we love vol. In fact,

when there's no volatility, that's actually when we do the worst, which is just smaller returns. when there's vol, we eat it up. And so a lot of this has to do with how we construct a portfolio with majors. So whether it's Bitcoin, Ethereum, Solana, et cetera, and how we express that, not just through spot tokens, but also through what we see as like complex option structures that are wildly mispriced consistently throughout the crypto market. But then on the flip side- What is an example of one of those? Yeah, sure. So let's say, I'm trying to think of something that I won't expose our positions. But here's an example. Actually, in December of last year, when Solana was kind of on the lows, $8, $9, we did get very long the spot asset. But we also put

on a costless risk reversal call spread. So what is that? We sold a put for end of January at about $7 strike for Solana, where if we got put to it, we're buying Solana at like $6.50, which we would be buying it anyway. But we took that premium in and paid for a $20 by $25 call spread for the end of Jan. We had determined with a high level of conviction and probability that that was going to be kind of the range for where Solana could potentially trade from, from a mean reversion, new flows coming in, et cetera, et cetera. Well, that's exactly what happened. So Solana literally traded up to 25 by the end of Jan. We basically pinned that call spread and it cost us nothing. So not only are we long the underlying, but we get additional juice from a costless options trade that I think candidly, a lot of folks in crypto don't know how to put on.

And I think you see this and this is not a detriment to any of the other fund managers out there, but most folks don't have, you know, 20 plus years of trading derivatives experience. They just don't. And crypto really will test your metal on drawdowns if you don't know how to actually structure things in a hedged way, but also finding ways of benefiting from, you know, high volatility environments. So most recently, Bitcoin trading up to $45K. Ethereum started to trade up to $2,400. Solana just went up to $125K. We sell puts and buy call spreads consistently because vol is so high. When vol is super low, we buy vol. We don't want to be selling vol when it's in the 30s and 40s. We want to be selling it when it's in the 90s and 100s, something like Solana. The last thing I'll mention on the portfolio construction side is the longer tail of assets. So at Asymmetric, we have a very strict, what we call concentration risk policy that I would think most hedge fund managers would have, but you know, we'd be surprised, where we will never take a position on that's more than 2% of the fund's assets under management for anything that's not a top 20 market cap coin.

And the reason we do this is that in the case that we're wrong, which sure, we've been wrong in the past with trades, 2% of the AUM can't blow up the fund, right? If you're putting 50% of your fund's capital into something like Shiba Inu, you know, like you got a really good chance of blowing up. And so number one, we have a concentration risk policy that we adhere to. And number two, it's hard-coded in our limited partner agreement. We never take more than 1x leverage notional, ever. So since we launched the fund in June of 2022, pick your benchmark. We are destroying every benchmark at this point.

And the highest net leverage we've ever run is a 0.9 with an average of about a 0.6. And the reason is, is we can, A, you know, identify opportunities that are great trading opportunities. And then B, also find ways of getting what we call embedded leverage in these option structures that dramatically improve our P&L. What type of LPs are drawn to this, right? You guys have very interesting backgrounds. You guys have managed macro funds, you know, billions of dollars.

You can share where you guys worked or kind of who was backing those organizations. is it that type of person, right? Kind of like the more traditional Wall Street hedge fund type manager that's interested in what you guys are doing? Or are you guys basically having to go and find, you know, crypto native type folks who are just looking for more sophisticated ways to get exposure to the market? Yeah. This is near and dear to my heart because raising money in 2022 was not fun. So, you know, look, it turns out that when I really didn't have a plan on launching a fund until a good friend of mine named Steve Jang, who's a very successful VC, came to me and he's like, Joe, you're kind of like the only guy that

understands tech and trading that's not at a fund. Come run a crypto fund at Kindred Ventures, his firm. And I said, look, I'm flattered, but if I'm an entrepreneur, if I'm going to do something, I'm going to do it myself. And he's like, I knew you would say that. So he helped me kind of get the structure in place and think about service providers and how to put it together. And he said, oh, by the way, I preemptively pitched you to Mark Andreessen and Chris Dixon, and they want to be the first money into your fund. And I was like, okay, you kind of don't pass up that type of opportunity. And so since then, the kind of spectrum of investors is primarily high network family office types that have some crypto exposure. But we just landed a huge fund of

funds out of Hong Kong that's backed by the largest commercial bank in mainland China, right? So I think a lot of it has to do with now people understand who Asymmetric is, what we're capable of, what our returns look like, how we manage risk, how we've managed through arguably one of the most brutal bear markets in crypto history to where we are today. And so that spectrum of investors, whether they're US, they're foreign, is kind of all over the map. What we have not found, no surprise, I had these guys verbally committed, the institutions, right?

Institutional investors clearly, you know, took it on the chin last year and, you know, effectively, you know, put the pause button on all forms of crypto fund managers, especially emerging managers like myself. We're comfortable where we're at with what we've been able to do with the highly convicted LPs that we do have of the kind of family office, high net worth, as well as fund to funds. But, you know, our door is always open to the institutions as well. Are they scared because the asset class itself is new and seems risky? And then when you get into trading of it and then derivatives and like you're kind of just compounding in their eyes risk? Or what do you think is holding them back? Yeah, I mean, this is just my opinion. It could totally be wrong.

But I do think that there is a couple of things. One, imagine you're, you know, like a PM or something at an endowment. it. And you want to allocate 1% of the AUM to crypto. Well, if you end up investing in something like FTX, you just ruined your career potentially. And so I think people got really scared with the career risk because let's be clear, if you're working at an endowment, it's a pretty cush gig for the most part. I don't think a lot of people want to take on that career risk, especially in the United States. And the headlines have been horrendous for the past, call it 18 months. that they're marginally improving now. So a lot of folks were just like, I don't want anything to

do with it because from a political standpoint, the headline risk, the career risk doesn't make a lot of sense. In addition to that, when you look at our strategy, a lot of these asset managers and institutions, they write massive checks. Well, we were a smaller fund to start with. So there's a kind of a limitation there. Right. That's more of a tactical operational thing. It's not really the major blocker. I think really people got freaked out from what happened in 2022. You saw a lot of these. A lot of them were in like the big VC funds that are clearly sitting on mismarked investments. and, you know, they have to mark those, right? And so I think you kind of put all this together and say, all right, if there is a sea change event with respect to regulation, headlines,

you know, Wall Street's adoption, whatever the thing may be, they'll probably start to dip their toe in. And to be super clear, there are, you know, I think you know this as well, there are some institutions that are involved. They're just certainly not seeking out, at least from my perspective currently,

crypto fund managers, whether on the hedge fund or the venture side. Let's talk macro. You guys understand it pretty well. You guys have already bet billions of dollars in the market on macro. I think the like real simple brain explanation is like interest rates go up,

all the bullshit goes down, interest rates went up and crypto went down. Duh. So if interest rates go down, then crypto will go back up. But like not so fast, crypto, Bitcoin, bonk, name your whatever tribe,

everything's been going up and interest rates are still high. Now, one argument is like, oh, people are just trying to front run like a Fed pivot, but it seems like maybe there's a detachment from like traditional macro and this industry. How do you think of the macro overlay and its importance for some of these assets and their price movement? Yeah. I mean, great question. So yeah, my trading partner, one of the best macro guys I know, managed the billionaire quarter at Revin Howard, global macro, cross asset, cross GO is very, very legit and understands the plumbing of the financial system extremely well. And so that, of course, factors into how we think about taking risk as it relates to what is arguably the

furthest out on the risk curve, which is crypto. Our view has been, and we've written about this, and folks can subscribe for free to check this stuff out. We wrote back in, I think, August or September of last year that we think the Fed is probably going to end up between 5% and 6%, and they're going to be done. Turned out that that was what so far is the case. Now, of course, there is a chance that they could hike into 2024. We don't see that as a strong possibility. The dot plots recently came out suggesting, I think, three hikes in the back half of the year. So yes, I think rates is kind of the obvious one. But then also, how does that impact the dollar? The dollar obviously got smoked since the last Fed meeting, and it continues to

move lower, right? Well, that is great for risk assets. We also look at things like the equity risk premium, which was, I think, almost negative, if not at zero, kind of at the, when yields were at their highs, that has to revert some, in some respect, and you've seen equities kind of rip since then. This is all appetite for risk, right? And I think, you know, a lot of the folks that So we're allocating the bonds, clipping, you know, 5% plus or 4.5% plus on your 10 year and 30 years. Those, you know, those are great trades, right? Like for that allocation of what you need. But at the end of the day, right, like if you're moving back towards an interest rate environment that is going to be, you know, I would say somewhat accommodative, it does not mean it's going to zero overnight, right?

But the market wants to, I think you're right, kind of sniff these things out, potentially front run them. Do we get ahead of our skis? Like, what does that actually do to asset inflation, which then translates to, you know, call it retailer consumer based inflation, TBD. But this is something that we have absolutely kept a pulse on. And when we started to actually, you know, crypto has this unique, I don't know, it's like a spidey sense where in October-ish, you know, leave it to crypto that a fake news headline is the thing that kicks off the bull market around the Bitcoin ETF. It's hilarious. But what we actually started to notice is some of the stuff we track internally, like, you know, we started to see stable coin flows actually tick up. We started to see inflows into institutional products really tick up. and that hadn't happened for quite some time. That was a difference. And so, you know, we wrote about this in our November piece, like one of the hardest things about being a trader

is, is understanding when the market has shifted, where something has changed, because if you've been in this like beat up bear market for 18, 20 months, it's really hard for you to get out of that mentality and be like, no, no, no, it's time to get long. Right. We were able to do that, you know, based on sentiment, but also some of the kind of metrics that we ended track on a macro level, but also very crypto specific. And since then, we haven't really seen that slow down. We think 2024 is going to be a boomer of a year, barring some crazy exogenous event, which we will not discount to zero. And a lot of it has to do with the macro setup. Now, when you start seeing global liquidity, it always surprises me how on one hand,

we have seen the Fed take one action, but maybe China specifically has been operating on the complete opposite end of the spectrum. Is it global liquidity that really matters? Or can we think of crypto as like a US centric type thing, and maybe the rest of the world is less important? Yeah, I mean, this is absolutely something we track, right? There's a really good company out of the UK called Cross Border Liquidity that this is all they do. Their reports are fantastic. And I think one of the key misunderstandings around global liquidity is that it's not just central bank, you know, tightening or easing. There's a lot to do with what they call the shadow monetary system. And when that starts to tick up, what, you know, shadow monetary system or shadow banking

system is like, you know, I think the very sort of egregious way to think about it is like hard money lending, right? Some guy has some money, he loans it to you to kind of do something to fix up a house and flip it or whatever, right? That's like a rough example of shadow monetary policy or shadow banking industry. That piece has dramatically picked up in the second half of this year. And of course, yes, China is injecting, it seems like, records amount of capital every other week. So yeah, that is going to have an impact. And then the other thing that we tend to track as it relates to outside the United States, specifically China, is capital flight out of China. Typically, when there's capital flight out of China, Bitcoin tends to do really

well. You can like draw your own conclusion as to why that's the case, right? So from our perspective, you know, there's the global liquidity kind of bottom, technical bottom occurred in 2022 of last year. But we've really started to see that firm up over the course of the past few months, not just with, say, you know, central bank easing policies, but really what's happening in the shadow monetary system as well. What about shorting in crypto, right? That's kind of a key component, but when you have these assets that can be incredibly asymmetric, it gets a little dicey. In the macro world, we see short hedge funds closing up shop, people walking away from shorting individual names and just trying to short baskets. It feels like maybe crypto is like still

the wild, wild west of short selling. What's going on there? Yeah. I mean, so we have a rule at asymmetric is that we do not short tails. We buy them and we rarely will short assets. We certainly will not short in the face of a booming bull market. We were actually short last year heading into October, November, but we did this through dirt cheap put spreads on Bitcoin. That's a pretty reasonable way of expressing a directional view to the downside with effectively limited risk, right? If you're buying a put spread, the amount of money you spent is what you can lose. I actually have this hypothesis, and it's not mine. It came from a friend of mine who's been in crypto for a long time, that I think a lot of people have watched the movie, The Big Short,

and they want to be right as a short. And the problem with this is that, well, number one, markets are by definition structurally designed to go up, right? So you're constantly fighting this multi-hundred years force of markets rising. And then in addition to that, shorting has a limited amount of upside. Whereas when you're long, it's, in theory, an infinity. And so there are there's a desire, I think, by a lot of folks to like short the top and kind of, you know, farm the clout engagement from doing something like that. And, you know, from time to time, we will hedge certain positions through whether we're you know, one of the ways that we tend to do it is we'll sell calls against our underlying, which, yeah, we're technically short the call.

But we're you know, it's a call spread. So we're not actually worried about, you know, the tail risk there. But when folks just go naked short in this market, a lot of it has to do, I think, with the culture of crypto trading and wanting to be that guy that short at the top of some meme coin or the market or whatever it may be. And time and time again, folks just don't realize that, you know, the odds and probabilities of being right consistently on the short side are just very, very slim relative to being right on the long side. When you're doing this work, how much of the returns in crypto, whether it's long or short, is from like sophisticated people taking money from unsophisticated people versus, no, you actually have a very sophisticated market and people are just on different sides of, you know, on different sides of an investment thesis or kind of long or short? Yeah, this is the old left curve, right curve or mid curve, right? um so if you guys have seen that meme uh look i think that there is there's no question that there is um uh there's a movement of what we would we would call more sophisticated market participants entering the market um there's a ton of unsophisticated market participants and what

and i think it's it's just because you know crypto is this global phenomenon that basically anybody can do for the most part. And of course, the exchanges will enable you to gamble your ass off with all that leverage. But one of the things that we look at is, we tend to look at how are options markets pricing things? Because in a lot of cases, like earlier this year, 2023, we were seeing spot volumes just getting decimated. The trading volumes were just super low, So yet, open interest and volumes on the CME and other options contracts or options providers and derivatives providers were going to all-time highs, like during the doldrums of spot volumes being the lowest they've been in years.

That signals to us that there is more demand from what we would call sophisticated investors or sophisticated traders. And furthermore, the fact that the CME now has the majority of open interest for Bitcoin and Ethereum products, those are guys that have to KYC, have to set up with Wedbush or Merix or something to this effect to be able to face the CME that have to fund these accounts. These are not, call them degens on the internet that are able to actually do this. And so if you just look at something like the CME with respect to volume and open interest, there's more sophisticated folks coming. And I do think that that trend will continue, especially as we see the ETF or ETFs get

approved in 2024. I do think a lot of the banks are actually going to really start to unleash the options trading desks and other forms of products to their customers. So we're all for that because we love trading options and derivatives. But as it relates to the retail folks, I will say the on-chain stuff, specifically on Solana, but there's Ethereum and other L1s and L2s as well. That's where you see a lot of, I would say, severe price dislocation and fragmentation amongst the understanding of the market participants. And there are very few sophisticated, I would say, market participants that are operating on-chain today. Now, one of the last things I want to talk about is this quote that you said,

full-blown depression or dog coins to a trillion. You got to unpack this for us because that just seems like such an absurd uh dichotomy to a degree but also like maybe that is why it's true yeah um so yeah i wrote about this in the asymmetric market update at the beginning of december um so i have a friend of mine and this has to do with you know meme coins box specifically um i have a friend of mine who uh you know runs macro at a very very large hedge fund out of New York. We were having this conversation back in 2022 because the aggressive approach that the Fed was taking with their tightening cycle was just super intense. He said to me, he's like, at some point, Jerome Powell is going to have to make a decision. Does he want a full-blown

depression or does he want dog coins to a trillion? It just resonated with me so well because I do think that as absurd as that may sound, that's where we're going. If you take the total market cap of all meme coins at this point, they're nowhere close to a trillion dollars. They could get there with enough liquidity entering the system, risk on people not wanting to miss the next Shiba Inu or Dogecoin or wherever it may actually be. We could see... And by the way, Zoomers, millennials to some extent as well, they have opted out of the traditional approach to investing because they can't afford it. And so here's something where they're like, yeah, yeah, that like a house or your, you know, 401k thing, like you're relevant

to me, this dog coin, I can make a hundred X my money or zero. Like there's a huge draw to that type of investment, if you will. And I think a lot of it has to do with the outcome of what's happening on macro as ironic as that may be. Uh, you know, if the fed is going to keep tightening and more or less crush the economy, pushing us into a depression, I don't think that's going to be the case, especially in an election year. Well, what that implies then is on the other side, the probability of dog coins to a trillion, I think goes up pretty significantly. Outside of Bonk, outside of let's call it top 20 market cap assets, what else are you most excited about? And it doesn't necessarily have to be an asset itself. It can be an industry

development. It can be maybe even a negative thing that you're like, hey, we actually think that this could happen and it'd be a huge opportunity for us to exploit for return. What are some things that fall into that category? Sure. Yeah. So, I mean, I've been not surprising, non-consensus on Ethereum L2s for a long time, for quite some time. And a lot of it has to do with, you know, there's so many of them. There's like 40 of them now. But I actually go back to the first principles approach from the end user's perspective. There's a lot of academic engineering that goes into scaling Ethereum. And to be super clear, I'm not anti-Ethereum in any stretch. I'm just looking at it from an investment standpoint. They're effectively pushing the scaling out to these layer twos. And from a user's perspective,

you open up a MetaMask wallet and now you got to switch this network and do I have to bridge something? And well, what if the bridge doesn't work or there's no bridge hacks? Or what if the L2, all of a sudden, inscriptions land on the L2 and the L2 stops producing blocks? What do I do then? There just seems to be a lot of challenges as it relates to the experience. This is not to suggest that they're not going to solve some of the centralized sequencer challenges as it relates to L2s, et cetera. So I think from a trade perspective, your L2s, those tokens will do significantly better than just holding Ethereum. This is of course not financial advice, but that's my view. But I think fundamentally when you're starting to take something that is part of the

core value of Ethereum, which is execution of transactions and pushing it out, you're taking value out of Ethereum. Now on the flip side, a couple of things that I am excited about are how to parallelize the EVM. This is, you know, again, full disclosure, we've invested in companies like Say, SEI, obviously, we're big Solana bulls, etc. There is this desire to still utilize Ethereum's virtual machine, but making it faster. And I'm hand waving intentionally to not lose folks in the technical weeds here. But there's a lot of work and interest that's being done in this space, whether it's, you know, say it's Monad, it's Neon, which is a, you know, a project that enables Ethereum devs to kind of use Solana as an L2 almost is the kind of loose

way of describing it. So that area is interesting from an engineering standpoint. Now let's talk about normies. I actually have been and continue to be the most bullish on mobile being the big next breakout for crypto and Web3. And we saw this, you know, in call it 2009, 2010, 11 timeframe, mobile first applications were there were applications that literally could only be on an iphone or an android device right we haven't had kind of mobile first web three applications yet and i think we're going to start to see more of that like we see we saw friends tech which is you know was an interesting experiment i think i'm not taking anything away from the team but you know the product had a lot left to be desired from a user's

experience perspective, right? So I do think mobile has probably the most white space and growth potential. We're tracking this very, very closely at asymmetric. And so hopefully, you know, the next kind of, you know, call it billion users, if you will, that are already on their phones all day anyway, start to adopt it, crypto and web three through, you know, mobile first web three applications. Now, on top of this, there's two other pieces I want to talk about before i let you go um you have this tweet that says eth 0 to 1400 to 80 to 4800 and then you say solana 0 to 260 to 8 to a thousand you think it's that simple it just kind of solana follows the the ethereum uh path yeah i mean look like uh uh this gets back to

kind of the uh i was having this discussion with some folks the other day in a telegram chat about um you know narratives and then over anything over fundamentals and um crypto is heavily narrative driven like let's be clear you know this is not news to anybody that's been crypto it's heavily narrative driven right and the thing about like that tweet specifically and the reason why i i put it out there is um people are going to see what happened with ethereum right and and go I missed Ethereum, or now I have a mandate at my TradFi hedge fund to be able to buy crypto or something to this extent. And you say, well, if there is another L1 that has the potential to repeat history, it's probably Solana, right? And it's that simple of a view that doesn't require

deep fundamental analysis, right? It is a narrative that can be picked up at a global scale. And again, we're talking about internet culture here, the virality of this narrative getting picked up. We're already seeing it with people like, what's his name? Raoul Paul, right? Like he's a big Solana guy and he's been talking about like the sole ETH trade or the sole BTC trade. It's not to say that ETH and BTC are going to not do well, but Solana is likely going to do better because a lot of these tailwinds, whether it's new users coming on board, Solana flipping the DEX volume of Ethereum, Solana flipping the NFT volume of Ethereum, or the fact that there's this narrative that's floating around saying like, hey, Ethereum went down to $80 and then

ripped to $4,800. Solana went down to $8. Who's to say this thing doesn't go to $1,000? I think that that has been and continues to be. And you see it in the price action of Solana. I mean, on Christmas Day, this thing was trading more volume than Bitcoin and Ethereum combined on Coinbase, right? So you see it in the flows, you see it in the narratives. And I really think from my perspective, I tend to kind of check myself because I'm like, is it really this obvious and this simple? And I think the answer is yes. Where can we send people to find you on the internet or learn more about asymmetric? Sure. So you can go to, I guess, x.com slash Joe McCann or twitter.com slash Joe McCann, and then asymmetric.financial. That's the website.

And you can contact us there. There's a little form you can fill out to reach out to us. And then if you want to read our free market updates that we put out every month, you can go to subscribe.asymmetric.financial. Joe, thank you so much. I appreciate it. I learned a ton today. I think you got a very unique view on the market. Your returns seem to show that there's something that you're thinking about that seems to be right. And so we'll definitely do it again in the future. Thanks, man.